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China’s biggest banks ban new North Korean accounts

Chinese vendors sell North Korea and China flags on the boardwalk in the border city of Dandong, China.
Kevin Frayer | Getty Images
Chinese vendors sell North Korea and China flags on the boardwalk in the border city of Dandong, China.

China's biggest banks have banned North Koreans from opening new accounts in an unprecedented move to clamp down on financial flows with the country's unruly neighbour.

Multiple bank branches, including those of the country's top four lenders, told the Financial Times they had imposed a freeze on new accounts for North Korean people and companies. Some are going even further, saying they are "cleaning out" — existing accounts held by North Koreans by forbidding new deposits.

The moves give weight to the theory that since Pyongyang's sixth and most powerful nuclear test this month, policy hawks in Beijing have gained the upper hand in an internal debate over whether to toughen sanctions against the Kim Jong Un regime.

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The measures go further even than what has been agreed internationally. UN sanctions, which were tightened once again last month, do not include a blanket ban on North Korean bank accounts.

"The move [against North Korean accounts] benefits China as a country," said Zhang Liangui, professor of North Korean studies at the Central Party School of the Communist Party of China. "China takes sanctions very seriously."

Banks implementing a ban on new accounts include the country's big five — Bank of China, China Construction Bank, Agricultural Bank of China, and Industrial and Commercial Bank of China and Bank of Communications.

Branches of each of these banks in China's north-eastern border towns, where trade with North Korea is concentrated, said they had been instructed to stop opening new bank accounts for North Korean individuals or companies.

Branches of three of the banks said they were in the process of cleaning out existing accounts, while the remainder did not comment on procedures for existing accounts

Although some bank branches said they had received notice of the freeze on North Korean accounts last month, others said they had been told as early as January.

"Branches didn't implement the rule all at the same time but it started recently," said one branch of ABC in Dandong, the border city through which roughly 70 per cent of China's trade with North Korea flows.

"Current bank accounts held by North Koreans should be cleared out," said a representative of a branch of ICBC in Yanji, the trading hub closest to the nuclear blast site at Punggye-ri. "We implemented the restrictions long before last month's sanctions."

However, traders pointed out that there were ways to get around the account ban to continue doing legal business with North Korea.

"We always use Chinese citizens living in North Korea as intermediaries when doing business," said one groceries trader in Dandong who wished to remain anonymous because of the political sensitivity around North Korean trade.

"There'd be no reason to freeze Chinese nationals' accounts, unless they're sanctioning individuals," he added.

Two Chinese businesspeople who run companies in North Korea — one of whom is based in the Chinese border town of Hunchun and one in Pyongyang — said all their transactions, such as payments to North Korean staff, were made in cash in Chinese renminbi, avoiding the need to have dealings between North Korean and Chinese banks.

The UN Security Council has previously expressed concern over the use of bulk cash to evade its financial sanctions.

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